Public Sector Property

19.10.18

CIPFA warns councils against exposing public money to risk in commercial property investment

Councils have been warned not to expose public funds to “unnecessary or unquantified risk” when borrowing to invest in commercial property in a statement from CIPFA.

In a joint statement, CIPFA chief executive Rob Whiteman and Richard Paver, chair of the CIPFA Treasury and Capital management panel, reminded councils that the prime objective of a local authority’s treasury management investment activities is the security of funds.

This follows concerns about the practice of councils borrowing to invest in commercial property disproportionately to their resources, which the institute says is unlikely to be consistent with the requirements of the Prudent Code and Treasury Management Code.

CIPFA shared concerns that there had been an “acceleration of the practice of borrowing to invest in commercial property,” and Whiteman and Paver said that “in some cases these investments have been financed by borrowing.”

They also said that the CPIFA code and the statutory guidance issued by the Minister of Housing, Communities and Local Government were “very clear that local authorities must not borrow more than or in advance of their needs purely in order to profit from the investment of extra sums borrowed.”

CIPFA warned that investment powers “must be used reasonably and in accordance with an authority’s primary function as a service provider.”

CIPFA will issue guidance setting out the “substantial risks” being incurred by these commercial practices and, in the meantime, councils are advised to focus on their requirements to compile a capital strategy.

They were also directed to regard the Statutory Investment Guidance, which cautions local authorities against becoming too dependent on commercial income, taking too much debt relative to net service expenditure, and taking on debt to finance commercial investments.

Enjoying PSE? Subscribe here to receive our weekly news updates or click here to receive a copy of the magazine!

Image credit - LPETTET

Comments

There are no comments. Why not be the first?

Add your comment

 

public sector executive tv

more videos >

latest public sector news

 County council director and CCG CEO to lead STP in joint-role

22/05/2019 County council director and CCG CEO to lead STP in joint-role

Hertfordshire and West Essex STP has announced a job-share partnership between the local county council and CCG to lead the STP. Iain MacBea... more >
Even ‘draconian cuts won’t be enough’ as councils face £50bn funding blackhole

22/05/2019Even ‘draconian cuts won’t be enough’ as councils face £50bn funding blackhole

Councils in England face a funding black hole of over £50bn across the next six years, according to a new report warning that local authori... more >
Government backs Northamptonshire unitary authorities with one-year delay and separate children’s services trust

15/05/2019Government backs Northamptonshire unitary authorities with one-year delay and separate children’s services trust

The government has formally approved the formation of two new unitary councils in Northamptonshire in 2021, a year later than first planned, also... more >

comment

Cities as places of opportunity

29/04/2019Cities as places of opportunity

Andrew Carter, chief executive of Centre for Cities, asks: if cities are places of opportunity for the low skilled, why are so many struggling? ... more >
Shaping healthy places with district councils

29/04/2019Shaping healthy places with district councils

District councils are achieving excellent outcomes by shifting health solutions from clinical settings to community ones. They have a significant... more >
The road more taken: delivering future connectivity and mobility

29/04/2019The road more taken: delivering future connectivity and mobility

Localis chief executive Jonathan Werran outlines the challenges to delivering future connectivity and mobility, and asks what policy shifts to ho... more >

editor's comment

25/10/2017Take a moment to celebrate

Devolution, restructuring and widespread service reform: from a journalist’s perspective, it’s never been a more exciting time to report on the public sector. That’s why I could not be more thrilled to be taking over the reins at PSE at this key juncture. There could not be a feature that more perfectly encapsulates this... read more >

interviews

Artificial intelligence: the devil is in the data

17/12/2018Artificial intelligence: the devil is in the data

It’s no secret that the public sector and its service providers need to invest in technology to help make better use of their resources. Bu... more >
Digital innovation in the public sector: The future is now

17/12/2018Digital innovation in the public sector: The future is now

One of the public sector’s key technology partners has recently welcomed a new member to its team. Matt Spencer, O2’s head of public ... more >
New Dorset Councils CEO on the creation of a new unitary: ‘This is going to be the right decision for Dorset’

05/11/2018New Dorset Councils CEO on the creation of a new unitary: ‘This is going to be the right decision for Dorset’

The new chief executive of one of the new unitary authorities in Dorset has outlined his approach to culture and work with employees, arguing tha... more >

public sector focus

View all News
 County council director and CCG CEO to lead STP in joint-role

22/05/2019 County council director and CCG CEO to lead STP in joint-role

Hertfordshire and West Essex STP has announced a job-share partnership between the local county council and CCG to lead the STP. Iain MacBeath, the director of adult social care services at ... more >
Even ‘draconian cuts won’t be enough’ as councils face £50bn funding blackhole

22/05/2019Even ‘draconian cuts won’t be enough’ as councils face £50bn funding blackhole

Councils in England face a funding black hole of over £50bn across the next six years, according to a new report warning that local authorities will soon be forced to resort to providing th... more >

the raven's daily blog

Empower your reader, choose print

07/05/2019Empower your reader, choose print

We are on a digital rollercoaster, swirling and twirling through a variety of different online advertising platforms – have we forgotten about traditional marketing platforms such as print? The UK is currently the global leader in advertising, generating £6 for every £1 spent on advertising to the economy. This year, UK ... more >
read more blog posts from 'the raven' >

last word

The importance of openness after Grenfell

The importance of openness after Grenfell

Following the recent Grenfell Tower tragedy, Lord Porter, chairman of the LGA, argues that if the public are going to have faith in the safety testing process then everything must be out in the o... more > more last word articles >